THE SINGLE TAX MOVEMENT.
Taxation of land value has had enormous appeal in the
What was its appeal?
The fixed supply of land, combined with
a rapidly rising demand for it, means that the owners of land gain from
the natural progress of society without having to contribute anything.
Many people, including Henry George, have been incensed at this "unearned
increment" and have proposed taxing away the huge fortunes accruing to landlords
in a rapidly growing society. A further appeal of taxes on land values arises
from the fact that economic rent can be taxed away without affecting the
allocation of resources.
Two problems arise, however, in any attempt
to tax this economic rent.
- First, the theoretical statement refers to economic
rent, not to the payment actually made by tenants to landlords. Because
what is called rent in the world is partly an economic rent and
partly a return on capital invested by the landowner, the policy implications
of taxing rents depend on being able to identify economic rent in practice.
At best, this is a very difficult thing to do; at worst, it may be impossible.
- The second problem is a normative one. If,
in the interests of justice, it is hoped to treat all recipients of economic
rent similarly, insurmountable difficulties will be encountered because
economic rent accrues to factors other than land.
It accrues to the owners of any factor that is fixed in supply and that faces
a rising demand.
Opera singers will gain in exactly the same way as landlords when the
society becomes richer and the demand for opera increases without any corresponding
increase in the supply of singers.
No one has yet devised a scheme that will tax the economic rent but not
the transfer earnings of such divergent factors as land, franchises, baseball
players, and supreme court justices.
The appeal of the single tax has now receded both because of the
difficulties mentioned above and because, with the great increase in the
size of the government, even an effective tax on economic rent
hardly be expected to finance the majority, let alone the entirety, of
government expenditures. The movement has left o curious anachronism behind
in the tax policies of those cities that levy their real estate taxes at
higher rates on the assessed value of the land than on the assessed value
of the building erected on the land.